The white certificate scheme: the italian experience and proposals for improvement

ECEEE 2011 SUMMER STUDY • EnERgY EffiCiEnCY fiRST: ThE foUnDaTion of a low-CaRbon SoCiETY 249

The white certificate scheme: the italian experience and proposals for improvement

Dario Di SantofiRE – italian federation for the Rational Use of EnergyVia anguillarese 30100123 Roma [email protected]

Daniele fornifiRE – italian federation for the Rational Use of EnergyVia anguillarese 30100123 Roma [email protected]

Veronica VenturinifiRE – italian federation for the Rational Use of EnergyVia anguillarese 30100123 Roma [email protected]

Enrico bielefiRE – italian federation for the Rational Use of EnergyVia anguillarese 30100123 Roma [email protected]

Keywordsbaseline, tradable white certicates, programme impact, na-tional energy efficiency plans, incentive mechanisms, energy efficiency policy, energy savings certificates, policy implemen-tation, cost effectiveness

AbstractThe Italian White Certificate scheme is one of the most com-plete examples of baseline and trade incentive schemes existing in Europe, created with the aim of promoting energy efficiency measures on final energy uses. The first draft was defined by Ministerial decrees in July 2004. The scheme provides for elec-tricity and natural gas DSOs1 the obligation to achieve yearly energy saving targets certified by the presentation of a corre-sponding number of white certificates (each equal to one toe). The DSOs can reach their target either by implementing energy efficiency solutions among end-users or by buying white cer-tificate from other DSOs, ESCOs or companies that have an appointed energy manager as provided by Italian law 10/1991.

During the first years of application, the scheme encountered some initial difficulties and has been corrected and modified with ad hoc legislative acts in December 2007 and in May 2008. Recently, it has become difficult to find white certificates on the market, due to the configuration of the scheme more than to market dynamics, and there is the necessity to change the scheme.

It is time to make a brief assessment of the White Certificate scheme, evaluating its effectiveness in promoting energy efficien-cy in comparison to the experiences of other EU member States.

1. DSo: distribution system operator.

Strengths and weaknesses, achieved results and suggestions to improve the current scheme will be addressed.

ContentsThis paper will present in the first chapters how the Italian White Certificate scheme works, its basis and market dynamics. Then it will focus on the evaluation of the economical impact of deemed savings projects, since they are the most important in term of accounted savings and deeply affect the capability of the scheme to reach the mandatory targets and promote energy efficiency solutions. The analysis will show some critical issues that could play a negative role in the future and suggests changes in the scheme’s design in order to avoid the possibility of a failure. Comparison with other schemes shows that this scheme works better in promoting the growth of energy efficiency actors than in stimulating the implementation of energy efficiency projects. For this reason, the paper suggests to consider white certificate schemes (called hereafter WhC) as a complementary policy, to be used together with other incentive schemes and policy tools.

The analysis of the Italian WhC is mostly based on three sur-veys recently implemented by FIRE2 among energy managers and ESCOs [1][2][3], on a study realized by FIRE in 2010 [4], and on information, views, experiences, and issues communi-cated by policy makers, institutional officers, FIRE’s members, and energy managers at FIRE’s workshops, conferences, and training courses [5].

2. fiRE, the italian federation for the Rational Use of Energy, is a no-profit associa-tion that manages the italian energy manager network on behalf of the Ministry for the Economic Development and promotes energy efficiency supporting profes-sionals and operators that work in the energy field. it deals with the italian white certificate scheme since 2001.

Contents Keywords Authors

2-011 Di SanTo ET al

250 ECEEE 2011 SUMMER STUDY • EnERgY EffiCiEnCY fiRST: ThE foUnDaTion of a low-CaRbon SoCiETY

PanEl 2: CURREnT EnERgY EffiCiEnCY PoliCiES

TheItalianWhiteCertificatescheme

ThesCheme’sbAsICs

The Italian WhC scheme (also known as TEE, acronym of the Italian legislative definition “titoli di efficienza energetica”, meaning “energy efficiency certificates”) created by the D.M. 20 July 2004, whose purpose is to promote measures to improve energy efficiency among end-users, has now entered its second phase, after the changes introduced by the D.M. 21 December 2007 and the D.Lgs. 30 May 2008 No. 1153.

The system is based on the obligation, imposed on electric-ity and natural gas DSOs with more than 50,000 customers, to meet specific targets, expressed as primary energy savings and increasing over the years as shown in Figure 1, aimed at increasing end-use energy efficiency. These savings can be achieved through energy efficiency actions among end-users and are assessed using tons of oil equivalent (toe) as measure-ment unit4. Cumulative targets for DSOs, set at 200,000 toe in 2005, rose from 2.2 million toe in 2008 to 6.0 million toe in 2012. This year a new ministerial decree should extend the scheme duration beyond 2012.

Figure 2 shows how the scheme works. A DSO or a volun-tary subject – a DSO with less than 50,000 users, a company controlled or controlling a DSO, an energy service company (ESC)5, or a company or institution that have appointed an en-ergy manager in accordance with article 19 of law 10/916 – may apply for WhC by presenting an energy efficiency project. If the project satisfies the rules set by AEEG (the Italian Electric-ity and Gas Authority) and is approved by ENEA (the Italian Energy Agency) – whose task is to check that the project is

3. D.M. is the abbreviation for ministerial decree, a legislative second rank act that is issued in accord to a law or a legislative decree (D.lgs.). The white certificate scheme was in fact provided for in the electricity and gas markets liberalization laws.

4. with the italian production mix, one toe is about 1,200 m3 of gas or 5,350 kwh of electricity. That means that a 0.187 toe/Mwhe and 0.086 toe/Mwht coefficients are used.

5. in order to participate in the white certificate scheme it is not necessary to be an ESCo, as defined in the 2006/32/EC directive, but it is sufficient for the company purpose to deal with the implementation of energy efficiency measures. This is the reason why we use ESC as acronym instead of ESCo. before it can present a project an ESC shall demonstrate to comply with this request by obtaining an accreditation (“accreditamento”) with aEEg.

6. industrial companies that have a primary energy consumption of at least 10,000 toe and the other type of companies or authorities other 1,000 toe have to appoint an energy manager by law. Their network is managed by fiRE.

technically and administratively sound –, the owner receives from GME (Gestore dei Mercati Energetici that manages the Italian Power Exchange and the Emission Trading, Green Cer-tificates and WhC markets) on its account a number of WhC corresponding to the recognized saving (one White Certificate equals to one toe of savings).

Every party with WhC on its account can then trade the cer-tificates either on the real time GME market7, which usually is held once a week, or through bilateral contracts registered on the GME’s platform. Operators that cannot present WhC projects may join the market too as traders. The scope of WhC trading is to allow obliged DSOs to obtain a WhC amount suffi-cient to reach their targets. The certificates should be presented to AEEG within May 31st of the year that follows the obligation. In the case of an insufficient number of certificates there are two possibilities:

• if the number of WhC is at least equal to half the DSO’s tar-get, the DSO is not subjected to penalties, but the next year it must add these lacking WhC to its target;

• if the number of WhC does not reach half of the target, the distributor is fined and it has nevertheless to add the lacking WhC to its target the next year.

It is worth noticing, since it is important in the scheme’s frame-work, that AEEG has not set the value of the penalty. That means it will be calculated on the basis of the extent of the default and of the involved DSO’s behaviour in complying with the request to correct it. Therefore, the market lacks this typi-cal price upper threshold. We will see in Figure 2 which is the actual threshold to the market price.

The end-user can benefit from part of the economic value of the WhC or, less frequently, from a discount on the capital cost of the solution or on the energy service annual fee, where applicable. It can be an active party only if it is an organization with the energy manager appointment obligation provided by law 10/1991.

Almost every project involving an improved efficiency in the final consumption of energy can be admitted in the scheme, from boilers to lighting systems, from solar thermal to cogen-

7. it is possible to participate in “viewer mode” to the sessions by following the directions given at the following link: http://www.mercatoelettrico.org/En/Mercati/accessowhC.aspx.

Figure 1. Yearly DSOs’ targets and issued certificates.





eration, from electric motors to industrial process projects. The exceptions not admitted in the scheme are projects aimed at increasing efficiency in electricity generation and solutions that are not listed in dedicated tables provided by the ministerial decrees that set up the scheme8. Each of the eligible projects is expected to issue a certain number of certificates, depending on the installed or replaced units, or on measured parameters (e.g. electricity and heat produced by a district heating plant), usu-ally for a period of five years (eight years for building envelope related projects, ten years for high efficiency CHP).

One of the main issues with WhC is how to calculate the energy savings, since in many cases it is not reliable and prac-ticable to use meters9. For some actions, the savings are deter-mined on the basis of special “files” defined by AEEG. In this case (deemed savings – with no on-field measurement – and engineering estimates – with on-field measurement) it is easy to evaluate the savings on the basis of the installed units or the produced kWh (e.g. solar heating, windows replacement, CHP and district heating, etc). For example every square meter of glazed solar thermal panels installed in Rome substituting an electric boiler corresponds to 0.154 toe10. For deemed savings, a preliminary survey is made by ENEA – previously by AEEG with the help of ENEA, RSE (Energy System Research Center) or other subjects – in order to evaluate the standardized sav-ings to be recognized by these files. If during the survey it is not possible to achieve a standardized method11, the engineer-ing estimates approach is proposed. It implies that savings are

8. The italian version of the D.M. 20 July 2004 is downloadable from the following link: http://www.autorita.energia.it/it/ee/def.htm.

9. Either because it would be too expensive or because it would be difficult or impossible to isolate the effects of the energy efficiency solution (e.g. for buildings thermal insulation).

10. This number will change in case of different location (the file considers five solar zones), of gas boiler or district heating integration, or of evacuated tube col-lectors. See “list of deemed savings file” chapter.

11. for example, because there is no agreement among the stakeholders (tech-nology manufacturers, energy providers, DSos, consumers, associations, etc), or because the savings vary a lot depending on some variable.

calculated on the basis of an algorithm based on at least one measurement. For example in the case of high efficient cogen-eration, the savings are calculated with respect to the amount of fuel consumption, the electricity produced, and the useful heat supplied to the user. The deemed saving approach has the advantage of requiring no meters and of making the WhC available since the implementation of the action. The engineer-ing estimates approach requires some measurements, delaying the emission of the first WhC usually by one year12. Both ap-proaches make it easy to present projects.

In the other cases, when a simplified file is not available, the proponent must get a prior approval for the procedure of meas-urement and evaluation of the savings he intends to use. These are calculated on the basis of measured quantities (the so-called “metodo a consuntivo”, or energy monitoring plan). In fact, the proponent shall make a market survey to estimate the baseline of the solution with respect to market standards and the related “additional” savings, and propose a methodology to calculate the savings based on appropriate metering. Under this proce-dure, important actions – such as industrial cogeneration and many industrial projects, building renovation, waste heat re-covery, etc – are presented.

An important issue is that only additional savings are consid-ered for WhC. Additional savings are evaluated with respect to a standard market baseline, dependent on the considered solu-tion and/or sector, that represents the average energy perform-ance of the typical action. This is a correct approach, whose aim is to give the incentive only to the savings promoted by the scheme – and not to the ones that would be obtained in any case because of technological improvement, mandatory stand-ards, or market developments –, thus theoretically ensuring that the incentive is both cost-effective and able to promote an increase in energy efficiency. Unfortunately, though, the effects of the additional savings approach are not the expected ones.

12. That is the time required to “measure” the savings.

Figure 2. Italian white certificates scheme.





In order to facilitate the comprehension of the way addition-al savings work, two examples are presented below, one for the deemed saving evaluation and one for the energy monitoring plan evaluation.

If we change our gas boiler with a condensing one at home, we can expect a high energy saving, since often the substituted boiler is old and characterized by low real efficiency13. But we have to take into account that, due to the technological im-provements, even low class boilers presently have a high effi-ciency, so the old boiler could not be considered as a baseline. The baseline should instead be evaluated with respect to the typical boiler installed today in the residential sector. In this particular case, since the Italian legislation set a minimum boiler efficiency that represents well the typical boiler instal-lation, this value represents the baseline. So the additional savings are calculated as a difference between this reference value and the condensing boiler efficiency, for which the corre-sponding deemed saving is 0.060 toe for a boiler with domestic hot water production installed in Rome. It is worth noticing that to reach one toe of savings with this action, from 10 to 27 boilers are needed, depending on the climate zone14, and this correspond, with a WhC price of 90 Euro, to 3–9 Euro/boiler/year.

In case of industrial cogeneration (CHP), for which there is no simplified file, it is necessary to use the monitoring plan ap-proach. Regarding the baseline issue, there are three possibili-ties, according to ENEA:

• CHP is not a usual practice in the considered industrial sec-tor, thus the baseline corresponds to the separated produc-tion of electricity and heat15;

• CHP is a usual practice in the considered industrial sector (e.g. paper or ceramic industry), but has not yet been used in the company that presents the project, thus the baseline corresponds to a typical CHP solution (e.g. steam turbine, or reciprocating gas engine);

• CHP is a usual practice in the considered industrial sector (e.g. paper or ceramic industry) and CHP was already used in the company that presents the project, thus the baseline corresponds to the solution with the higher efficiency be-tween the typical CHP system and the ex-ante plant.

This shows how the same solution, which virtually ensures the same energy consumption reduction, is treated differently with respect to the user. This means that this incentive scheme does not consider the capability of different technologies to pro-mote a real energy consumption reduction, both because of the additional savings and because it does not take into account projects’ lifetime. Besides, additional savings do not mean ad-ditional actions: we will show below that the incentive is often too weak to justify an operator choice (i.e. the energy efficiency action will be carried on in any case, regardless of the possibil-

13. for example 70-75 %, since not only the nominal efficiency is lower, but also the boiler works at partial loads most of the time, due to the mild italian weather. This of course amplify the real efficiency gap between the two solutions.

14. in italy there are six climate zone, classified from a (the hotter one) to f (the colder one). Roma is in zone D.

15. This is by the way the case of ChP for civil sector heating and cooling uses, as considered in engineering estimates file no. 21.

ity to obtain WhC, and this means that WhC become only a premium for the ESC or end-user that presents the project).

In fact, since it is difficult to find reliable market data in Italy, the evaluation of additional savings is usually more complex and time consuming than the identification of the required meters and of the proper algorithm. For some actions, like the domestic boiler example, it dramatically reduces the savings, with respect to the ex-post VS ex-ante energy consumption difference, and thus the economic impact of WhC. For this reason, it is a main variable in the scheme and should not be underestimated.

When renewable sources are used as fuel, the produced useful heat is integrally converted in savings with a 0.086 toe/MWht coefficient.

There are four types of WhC:

• Type I: electricity savings;

• Type II: natural gas savings;

• Type III: savings of other fuels (LPG, diesel oil, etc) for other purposes than transportation;

• Type IV: savings of other fuels (LPG, diesel oil, etc) for transportation uses.

This classification exists because end users pay a tariff compo-nent on electricity and natural gas distribution to allow obliged DSOs to recover costs “not covered in other ways”16. This com-ponent gives way to a reimbursement for obliged DSOs that is currently worth 93.68 Euro/toe (it ranged between 88.92 and 100.00 Euro per toe from 2005 to 2010) and is assigned to DSOs upon the presentation of type I, II, and III certificates to the AEEG17.

The scheme provides a minimum threshold for presenting projects, which varies from 25 to 200 toe, depending on the type of actions and the proponent (see Table 1). This is miti-gated by the fact that projects implemented among different users can be combined to achieve the required threshold. The threshold is an issue for small projects, especially in case of energy monitoring plans, and for companies with an energy manager, because for a single user, reaching a 200 additional toe savings is not an easy task.

Table 2 shows that if a proponent implements different ac-tions benefiting different clients, they can be added together provided that they present the same evaluation method (all deemed savings, for example). If different evaluation methods are used (for example solar thermal, which uses deemed sav-ings, and CHP, which uses engineering estimates), the corre-sponding actions can be added only if they benefit a single user and are presented as a monitoring plan.

16. This definition, provided by D.M. 20 July 2004 and meaning that the DSos reimbursement shall take into account the earnings related to energy efficiency investments, is not easy to translate into numbers. Since DSos are mainly passive parties, because they usually do not implement projects, it is possible to say that the DSos reimbursement shall be substantially similar to the whC market price. DSos actually claim a reimbursement higher than the market price, in order to cover the expenses related to their units dealing with whC and the reduced energy earnings from distribution.

17. Type iV certificates do not give access to reimbursement, thus making them not worth to exchange on the market (this is the reason why in the price diagram in figure 3 they are not present). it is expected that a new law will change this and so in the next years they also will become interesting.





DemAnD,supplyAnDWhC’sprICe

The scheme therefore works on the basis of a demand, repre-sented by the obligation imposed on DSOs (e.g. 4.3 million toe in 2010), and a supply, represented by the certificates held by parties who have presented and got approved energy efficiency projects.

Since there is a demand/supply driven market, periods of oversupply, as in 2008, when the price tends to remain relatively low can be followed by periods when the price goes up because of a shortage of certificates. The certificates are bankable until 2012 and can therefore be withheld by the owner to be sold at a time considered more favourable.

In 2009, the certificates were traded at a value between 75 and 85 Euro per toe, whereas in 2010 the price has reached 100 Euro per toe and has averaged in the range 90-95 Euro per

toe. Figure 3 shows the price trend over the years (till the begin-ning of March 2011)18.

WhC can be cumulated with another national scheme grant-ing a 55 % tax deduction when energy efficiency refurbish-ments are undertaken, and with many regional incentives. This means that a household owner can obtain the tax deduction for a solar thermal or a double glass window installation, for example, and an ESC can ask for WhC (of course provided it reaches the minimum project threshold by summing up differ-ent clients), offering a discount to the end-user. They are also compatible with green certificates and the RES feed in tariff, but only for the thermal part (i.e. green certificates can be issued on the electrical output of a biomass fired cogeneration plant while WhC can be obtained on the heat recovery, if used for heating, air conditioning, or other useful purposes).

18. Type iii whC were not exchanged before the end of 2008 because till then they opened no right to tariff reimbursement. Presently only type iV whC have this problem.

Table1.minimumrequiredthresholdstopresentaproject.

Threshold (toe) DSOs and company with energy manager Voluntary parties

Deemed savings 25 25 Engineering estimates 100 50 Monitoring plan 200 100

Possibility to sum different actions in a project to reach the minimum threshold

Homogenous savings evaluation methods Non homogeneous savings evaluation

methods

One client Deemed savings Engineering estimates

Monitoring plan Monitoring Plan

Many clients Deemed savings Engineering estimates

Monitoring plan Not permitted

Table2.possibilitytosumupdifferentactionstoreachthethresholdsofTable1.

Figure 3. WhC (TEE) price trend.





DeemedsavingscapabilitytopromoteenergyefficiencyAs part of the scheme of energy efficiency certificates, the method of deemed savings deserves special attention because, since the scheme has started, using standard files to quantify the energy savings has largely prevailed over the other two types of evaluation, both in terms of savings certificates and number of operations performed (as shown in Figure 4 [6]). The reason for this success lies mainly in the simplicity of appli-cation of such files, which do not require direct measurements of energy flows.

It is worth noticing that the fall in engineering estimates is due to an administrative tribunal decision in 2006 that blocked the possibility to recognize savings related to CHP and district heating files19.

Another emerging trend is the growth of monitoring plans, due both to a better understanding of the methods needed to present this kind of projects, and to an increasing difficulty in presenting new deemed projects.

Figure 5 shows what kind of technical solutions were pre-sented among deemed saving files. It is clear that compact fluo-rescent lamps, together with low flow shower taps and aerators lead the game, with 87 % of savings. Altogether, the other files amounted only to 13 %.

This is because the files related to CFL, aerators and shower taps permitted to earn through WhC more than their capital cost. In addition, it was sufficient to distribute lamps, without any on-site installation. These actions provided a very strong economic benefit, resulting in a rapid diffusion of CFL on the market. Thus CFL became the baseline, and AEEG decided to change the additional savings coefficient20, reducing the ad-ditional savings. In the list of the deemed savings files at the

19. The tribunal decision followed a request of a DSo that asked for an increase in the calculated savings. The tribunal gave reason to the DSo and asked aEEg to change the algorithm, but the aEEg tried to have the sentence changed by the superior tribunal (Consiglio di Stato), which confirmed the tribunal decision, and then it took another half a year – in 2010 – to issue the new files no. 21 e no. 22. Thus all the ChP and district heating plants realized between 2006 and 2010 will have their whC issued in the end of 2010 and for this reason a strong increase in the engineering estimates percentage is expected in 2011 aEEg’s report.

20. To keep into account only the additional saving, a additional saving coefficient is used, which is 100 % when the baseline corresponds to the ex-ante situation and a value between 0 and 100 % in the other cases. The gross savings are then mul-tiplied by this coefficient to get the net savings that are considered to issue whC.

end of this article, the new values of the files are also presented (marked with a “bis” or a “tris”).

The other solutions are less profitable, and in most cases the cash flow generated by WhC trading seems insufficient to promote their implementation. FIRE has pointed out this risk since the beginning of the scheme, when the availability of the first file for CFL lamps permitted to get one WhC every 79 lamps, making this action very inviting for DSOs and ESCs. As soon as the file was modified, reducing the additional sav-ing coefficient, this solution became less attractive; the same happened with aerators and low flow shower taps. As a conse-quence the percentage for these solutions has been reducing in the recent times. Since WhC market prices have not changed much, the lack of other highly profitable solutions explains the reason why it is getting difficult to find WhC on the market (as shown by Figure 1).

It is possible to start from a simple calculation, in order to better explain this point. One toe means around 90 Euro from WhC, as seen in Figure 3, and an economic saving on bill of 400-600 Euro for the large industrial users and 700-800 Euro for the civil ones with Italian energy prices21 (household aver-age costs in early 2011, as reported by AEEG, are 0.75 Euro/m3 and 0.16 Euro/kWh). Apparently WhC increase the cash flow of a 10-20 %, which would represent a good incentive. There are two aspects that shall be considered: this percentage is usually lower due to the additional saving coefficient and the impact of the incentive – cumulated over the years of WhC recogni-tion – depends on the capital cost of the action (acceptable investments in term of pay back time usually average 1,000-2,000 Euro/toe for industrial users and 3,000-6,000 Euro/toe for civil users, whereas the WhC contribution is around 400 Euro – calculated at a 5 % discount rate – on “additional” toes).

In order to address more specifically this issue, FIRE carried on a study in 2010 within the “Ricerca di Sistema” programme to evaluate the “incentive to capital cost of investment” ratio for deemed savings files.

The main hypotheses are:

21. lPg and diesel oil will cost 1,300-1,500 Euro/toe. large industrial costumers costs are lower, but usually higher than other EU Countries.

Figure 4. Usage of simplified files and monitoring plans as total

savings percentages.

Figure 5. Deemed savings share by different solutions.





• for each technology a range of typical investment cost has been estimated;

• the value of 90 Euro/toe has been applied for the years of the incentive (five or eight depending on the solution) and discounted at 5 % ;

• the incentive/capital cost ratio has been calculated for typi-cal situations, with reference to climate zone, solar zone, and other files’ variables.

Figure 6 shows the files that presents a “WhC incentive/capital cost of the action” ratio higher than 10 %. As it can be seen, apart from lamps, taps, and stand-by, only VSD for industrial pumps, solar thermal collectors in substitution of electric boil-ers, and the substitution of electric DHW boilers with gas boil-ers remain available. All other actions present a lower ratio.

It is worth noticing that even if a less than 10 % ratio can be good when calculating NPV and IRR22, from a psychological point of view it is insignificant, at least in terms of helping to choose which energy efficiency action to implement.

The methodology of evaluation through deemed savings presently works more as a support scheme for ESCs rather than as an award to stimulate the investment in energy efficient technologies. The main reason for the high disparity in terms of economic returns among the technologies is due to the fact that the WhC scheme considers only the yearly additional sav-ings achieved by each technology in the 5-10 years for which WhC are issued, and is not related to the expected lifetime of the different projects. Thus the market baseline of the different technologies becomes fundamental in evaluating the weight of the WhC incentive.

Although in principle this represents a just form of re-source allocation, giving full importance to the objective to be achieved and not to the means, in practice it results in leaving out of the game several viable technologies that could be imple-mented broadly, but are not stimulated by the WhC scheme. As

22. nPV (net Present Value) and iRR (internal Rate of Return) are well known economic indicators to evaluate investments.

it is very difficult to find enough certificates on the market, the situation is becoming critical.

The low revenue per unit and the complex procedure for the collection of documentation to present a project, in fact, often do not justify the effort of presenting a WhC project. This is the case of actions that are not normally made by actors allowed to present projects, such as small companies and individual installers, for heat pumps, boilers, air conditioners, window glazing and insulation in residential buildings. In these cases, the number of units to reach the threshold for submission of a project is particularly high, and the per unit revenue is low. To-gether they make it inconvenient to take part in the scheme23.

One option for equipment and appliance retailers and in-stallers may be to rely on an ESC, which could serve as a “col-lector” of actions. On the other hand, however, it would not be easy to involve such a company, because of the low premium available, if the collectable certificates are not a conspicuous number.

This is the reason why the scheme is not able, at least with the actions considered so far, to promote these technical solutions efficiently.

In order to check the position of energy managers and the other operators on this issue, FIRE made three surveys, one aimed at ESCos in 2009 [1] and the other at energy managers, which closed respectively in 2009 [2] and in January 2011 [3]. The results, with respect to the perception of the WhC strength, was similar. We present below information about the most re-cent survey. A questionnaire was sent to approx. 2,000 energy managers and FIRE received 144 replies24.

Figure 7 shows that the participation of energy managers in the WhC scheme has till now been very scarce and that many

23. for example, in the case of the replacement of single glazing with double glaz-ing in residential file n. 4, between 1,100 and 12,500 m2 of surface, depending on climate zone, need to be replaced to reach the minimum threshold of 25 toe with a corresponding revenue varying from 12 Euro to 1 Euro per square meter.

24. Considering that the questionnaire was a complex one and that it remained open for answers for a short period the answer rate is satisfying and higher than usual.

%

Figure 6. WhC’s incentive VS capital cost ratio for deeemed savings files. Only results above 10% are shown.





of them do not consider the scheme worth joining in. The most commonly provided reasons are:

• lack of interest due to an insufficient economic value;

• complexity of the scheme;

• lack of an adequate knowledge of the WhC scheme;

• size of actions below the scheme threshold;

• lack of a dedicated call centre for queries about the scheme;

• lack of guidelines for monitoring plans evaluation and for simplified files;

• lack of interest in energy efficiency measures from their company.

The first three points are linked together, and witness the fact that the WhC scheme is not a strong incentive to implement energy efficiency actions. Besides, its complexity and the dif-ficulty of getting information frighten many people more than the scheme deserves.

• The reasons behind this result are the following:

• Obliged distributors do not play a direct role in the im-plementation of energy efficiency measures (i.e. their only source of revenue is the tariff reimbursement); they do not really care about the WhC scheme, even considering their ESCOs25.

• Low incentives, together with the minimum threshold, the complexity of the scheme, and the lack of information, keep away many potential participants.

• The financial crisis does not help energy efficiency, at least until energy prices remains low (which is not the recent trend).

25. for example EnEl Si and EnEl Sole for the EnEl group.

CriticalaspectsThe WhC scheme has shown some critical issues, only partly resolved by the latest measures issued by public authorities. Legislative decree 115/2008 opened the way for some substan-tial changes, but it was not transposed in a ministerial decree. The government showed a renewed commitment to the scheme with the legislative decree 28/2011 related to the 2009/28/EC directive, so 2011 should be the year for a confrontation be-tween institutions and stakeholders to identify the possible improvements.

The following issues could enhance this scheme if correctly dealt with.

Presently only 25 simplified files have been published by AEEG26. Given that over 90 % of the presented projects cor-responds to this kind of actions, it goes without saying that this is a limiting factor: many implemented projects that fall outside the files are not asking for certificates. This is reflected by the very low number of applications submitted by companies with energy managers (only two at the end of June 2010, to be com-pared with the over 2,000 companies and local authorities that have an appointed energy manager).

Information about the availability of WhC on the market and their trading prices have improved thanks to recent measures (e.g. bilateral market average prices are now published month-ly), but this is still not enough to enable an investor to properly manage the price risk and the best market strategies, both be-cause of the low frequency of updates and of the lack of data. This represents an important limitation for a baseline and trade scheme. It would be useful to have a web page on the GME website with real-time data. And it would not be difficult to achieve, considering that all the projects are presented via web.

The definition of the new rules on the reimbursement rate for DSOs – indexed to the trend of the main energy carriers, but not to the outcome of the market in the previous years - is another limit to the price of WhC, given the reluctance of DSOs to directly implement projects and to purchase certificates at a price greater than the refund. Having no longer profitable

26. The twenty files indicated in the list below and five engineering estimates: ChP, district heating, VSD for water pumping systems, natural gas decompression systems, centralized heating and cooling for buildings.

Figure 7. Energy manager answers to one of the questions raised within a recent FIRE survey. SSE=ESC, distributor=DSO.





projects like the fluorescent lamps to drive the supply side, considering the fast growing energy saving targets, represents an issue since WhC price is rising and the reimbursement is not. Thus, unless the reimbursement rule is reviewed to allow higher values, to increase the number of presented projects, a simplification of the applications for monitoring plans, and possibly the reduction of the thresholds for projects dimension will become almost a requirement.

The possibility to introduce a minimum threshold for the price of WhC could also be considered, like the one used in the Italian green certificate scheme, in order to shield participating companies from the risk of very low prices on the market (note however that this is not a risk in the near future, because of the lack of certificates expected for the 2011 obligation).

Concerning additional savings, it is better to maintain them, but it could be useful to simplify their evaluation in monitoring plan projects, or at least to provide sectorial guidelines to help proponents to identify them.

ATeeschemetobegeneralisedtoalleuropeancountries?Even if energy efficiency is usually considered the most cost-effective option to achieve emission reduction targets, it is well known that it needs some support both to implement long pay-back time actions and to overcome non economic barriers. For this reason, during the last decades, starting from the oil crisis of the 70s, many policies have been adopted and many incen-tives used.

At EU level, what has been achieved so far is not in line with the energy efficiency goal of 20 % by 2020. Even if it is not man-datory, stronger efforts are needed and a new European En-ergy Efficiency Action Plan (EEAP) has recently been adopted, together with new legislative proposals and energy directives recasts. In 2013, the European Commission will provide an “assessment of the results obtained and whether (energy effi-ciency) programs will, in combination, deliver the 20 % objec-tive”. In the case the EU target is unlikely to be achieved, “the Commission will propose legally binding national targets for 2020”. It means that the efforts required by the national energy efficiency policies must be strengthened and more incentives need to be created. Among measures indicated in the EEAP, WhC are perhaps the most complex solution, and also a very new one. In this chapter some European WhC schemes are briefly compared, together with other type of policies.

Table 3 shows some differences among the three WhC schemes used in the UK, France, and Italy. It is worth noticing that all schemes have been able to fulfil their targets in the last years. They differ in many aspects, but additional savings are a fundamental requirement for all three schemes (for further investigation we suggest [1]).

The French scheme, started in 2006, is the closest to the Ital-ian one. For measuring savings, standardized measure files have been defined, providing eligibility criteria and calculation methods for the most common measures. The energy unit to measure the realized energy savings is the kWh cumac27, which

27. The word “Cumac” is a synthesis of the french words ”cumulé” and ”actual-isé”, meaning added and discounted.

takes into account the capability of the implemented actions to produce savings during its lifetime. The national target for the 2006–2009 period has been totally fulfilled (and even ex-ceeded) by the obliged actors. For the second obligation pe-riod, the obligation has been increased from 54 TWh cumac up to 345 TWh cumac, with transport fuel suppliers added to the energy suppliers as obliged actors. Compared to the Italian scheme, the number of French files is much higher (currently, there are about 200 files for 200 energy efficiency actions), and covers almost all energy savings registered in the French scheme. Another method of calculation is admitted: specific field measures are presented to and evaluated by ADEME, and this aspect can be easily compared to the Italian monitoring plan evaluation method.

It is worth noticing that not only these three schemes, but also the one set by Flemish government in the Belgian federa-tion, created in 2003, have fulfilled their targets and are consid-ered cost effective, since the cost to save energy is lower than the cost of supply. The French scheme is more capable of pro-moting structural actions, since the savings are calculated on the lifespan of the projects. This is an important point, together with a simple procedure for approving new deemed savings files.

At EU level, the European Commission would like to create a harmonized scheme, but since each country has already set its own schemes, with different obliged actors, different fields of action and also different energy units to calculate the savings, it is almost impossible to start a new general scheme with com-mon rules. What can be done is the creation of an energy sav-ings obligation scheme in the framework of the Energy Services Directive recast that will be done in the next months. Should this be agreed upon, the EU will provide a general framework, while national schemes will remain in the member States’ responsibility. Two fundamental points that the European Commission wants to clarify are that savings must be “real” and “measurable”. Qualitative energy efficiency improvement measures should also be provided together with the completion of a competitive energy market where ESCos should be seen as the main boost. Moreover, consumer rights and consciousness must be strengthened (information, access to ESCo services, demand side management) [14, 15].

As alternatives, or complementary instruments to WhC, it is possible to consider tax deduction schemes, guarantee funds, incentive for interest28, and schemes that give a set incentive for every saved kWh or toe. Italy is planning to issue the sec-ond and the third schemes, in order to promote ESCOs and small energy efficiency measures respectively. Considering the emphasis that the EEAP puts on ESCos, guarantee funds and incentive for interest can be a very effective solution. Energy efficiency actions are usually cost effective, so it is important to create the conditions for facilitating ESCos’ activities. Tax deduction is interesting especially when undeclared work is widespread, because revenue generated by taxes paid by unde-clared labourers can help balance the cost of the policy for the State budget. In Italy, the 55 % tax deduction, whose amount is distributed over five years (ten for projects implemented in

28. These are schemes that finance the interest rate given by banks, thus making convenient for third party financing and energy performance contracts. guarantee funds have similar effects.





2011), has been an outstanding success for building actions like solar thermal, double glazed windows, thermal insulation and high efficiency boilers. Another tax deduction scheme, 20 % for electric engines, has instead been a failure. This suggests that such schemes require a high level of incentive to be effective. Besides, they can only be used by people with a tax debit, and this is an important limit.

DiscussionandproposalsThe WhC scheme is a complex scheme, and therefore difficult and expensive to manage for the DSOs and voluntary parties. Therefore the role of AEEG and from now on of ENEA and GSE29, both as regulator and facilitators, will be decisive for its success.

In fact, due to the issues indicated in this paper, it may be questioned whether WhC schemes are useful and effective. It is difficult to give a yes/no answer, since there is no experience of such a scheme at a maturity stage. Most of the indicated issues can be overcome by the right policy measures, so it is worth to try at least some modifications.

The first issue is how to judge whether it has been a success. An important point is that the achievements of the scheme should be measured on the basis of the actions actually pro-moted and the contribution to the development of energy service companies and the energy efficiency market, not just to the fulfilment of the mandatory targets. The Italian experience

29. The recent legislative Decree 3 march 2011 n. 28 (adoption of the 2009/28/EC directive) assigns to gSE (gestore dei Servizi Energetici) the role of managing the white certificates projects platform that presently is managed by aEEg.

demonstrates that the targets can be achieved with projects that at least in part are not really promoted by the scheme, and then are not really “additional”30, even if they comply with the AEEG definition of additional savings (e.g. the household boilers ex-ample previously shown).

In Italy the situation can be portrayed as a half full glass. The scheme has worked well so far for some specific actions and has been able to achieve the mandatory targets. After the end of first phase, dominated by compact fluorescent lamps, it has become difficult to reach the targets. Recognizing this issue, the legislative decree 3 March 2011 gives the possibility to the Ministry of Economic Development to increase the value of the incentive – by allowing higher prices in the market through a revision of the DSOs reimbursement and/or by introducing multipliers for the acknowledged savings based on the lifespan savings of different solutions31 –, and to allow the presentation of new projects to become simpler and cheaper.

Up to now the Ministry of Economic Development has demonstrated to be able to overcome the main issues of the schemes, so it is possible that the modifications that are going to be decided will improve the scheme.

The second issue is what are the goals of a WhC scheme. There are three possibilities.

30. because whC do not affect the choice of the project proponent of implement-ing the project, as shown before in the document.

31. for example interventions on the building envelope or on district heating could have a multiplier equal to three or four, since the savings will be generated for a long time, whereas solutions such as lamps or stand-by systems will have one or less, since they won’t last more than five years.

Table3.Comparisonamongdifferentwhitecertificateschemes[14].

Table 3. Comparison among different white certificate schemes [14].





In the second case, it is possible to consider the possibility of using two different and additional schemes: WhC as a basis and another instrument (e.g. a tax exemption, a guarantee fund, a fixed premium for toe scheme) dedicated to effectively promote specific energy efficiency measures. It could be something like the experience of the 55 % tax exemption in Italy. The advan-tage is that it is possible to maintain an almost pure baseline and trade scheme, with the related cost-effective benefits, while having the opportunity to promote a rapid diffusion of some technologies.

The third case has the advantage, with respect to the previous one, of avoiding the complexity of dealing with cross-subsidies. It is though quite difficult to manage without the introduction of multipliers, which can compromise the cost-effectiveness of the scheme, or of a high market price32, both measures that can lead to speculative effects. Even in the hypothesis of a perfect policy design, able to assign the right multiplier to each tech-nology, the complexity of the system can become excessive and unmanageable.

32. in the italian scheme it means to set a higher value for the DSos’ reimburse-ment. of course it would be very difficult to determine such a value.

• To achieve its mandatory targets. It could be easy or difficult depending on how easy it is to present a project and evalu-ate the savings. It does not ensure an increase in energy ef-ficiency, but can still be useful for the assessment of national savings. WhC’s price can be very low.

• To promote energy efficiency operators and professionals growth. Same as above, but with a higher WhC’s price, and it will add to savings assessment the capability of consist-ently increasing the growth rate of ESCs and other actors. It is advisable to have easy procedures to present projects and to evaluate savings.

• To stimulate the implementation of additional energy ef-ficiency projects. In this case, which will comprehend the previous ones, the market price should be high enough to allow the WhC price/capital cost ratio to be well above 20 %. In this case, it is advisable to have strict procedures for the evaluation of savings, since the incentive value is strong.

Considering the costs involved in the creation and manage-ment of a WhC scheme, the first case should not be taken into account, unless policy makers reckon it as very important in their country.

Table4.Deemedsavingsfiles.

min max min max max min

1-tris CFLs P <15W lamp 212 4.049 0 5 101.215 5.3062 electric DHW boiler -> gas DHW boiler 1 boiler 14 14 73 73 342 3423 4 stars boiler

heating 1 boiler 11 71 14 92 1.786 272heating and DHW 1 boiler 9 25 40 117 625 214

4 gas DHW boiler -> high efficiency gas DHW boiler 1 boiler 16 16 64 64 391 3915 single glazed windows -> double glazed windows

houses 1 m2 43 500 2 23 12.500 1.087offices 1 m2 56 500 2 18 12.500 1.389

hospitals 1 m2 38 250 4 26 6.250 9626 walls and roof insulation

houses 1 m2 83 3.333 0 12 83.333 2.083offices 1 m2 108 3.333 0 9 83.333 2.688

hospitals 1 m2 79 1.667 1 13 41.667 1.9697 photovoltaic

beta< 70° 1 kWp 3 4 240 346 104 72beta> 70° 1 kWp 4 6 166 241 151 104

8-bis solar thermal collectors for DHWelectric boiler substitution 1 m2 4 10 104 229 240 109gas/oil boiler substitution 1 m2 7 16 61 134 410 187

district heating 1 m2 10 22 45 98 556 2559 VSD electric engines for industrial pumping systems

1 turn industry 1 kW 12 42 24 83 1.042 3012 turns industry 1 kW 6 20 49 166 508 1513 turns industry 1 kW 3 11 95 319 265 78

seasonal industry 1 kW 11 38 27 90 940 27811 high efficiency electric engines

1 turn industry 1 kW 37 294 3 27 7.353 9362 turns industry 1 kW 19 149 7 53 3.731 4693 turns industry 1 kW 10 77 13 102 1.923 245

seasonal industry 1 kW 35 270 4 29 6.757 86813a-bis aerators and low flow shower taps residential sector 1 device 187 187 5 5 4.682 4.68213b-bis low flow shower taps hotels

electric boiler 1 device 60 60 17 17 1.488 1.488gas/oil boilers 1 device 101 101 10 10 2.525 2.525

13c-bis low flow shower taps sport centerselectric boiler 1 device 11 11 89 89 282 282gas/oil boilers 1 device 19 19 53 53 476 476

15 air to air domestic heat pumpsCOP 3,0 apartment 6 59 17 166 1.471 151COP 3,5 apartment 4 48 21 226 1.190 111COP 4,0 apartment 4 40 25 272 1.000 92COP 4,5 apartment 3 36 28 308 893 81

17 public lighting control systems 1 kW 4 14 70 234 357 10718 MV public lighting lamps->HPS lamps 1 lamp 5 31 32 206 779 12119 air conditioners < 12kWf 1 kWf 263 588 2 4 14.706 6.57920 walls and roof insulation for cooling purposes 1 m2 1.250 5.000 0 1 125.000 31.25023 led semaphoric lamps lamp (10 W) 14 40 25 74 998 33924 led lamps for cemeteries lamp (0,5 W) 611 611 2 2 15.263 15.263

25a anti standby anti stand-by device 150 150 7 7 3.741 3.74125b anti standby anti stand-by device 376 376 3 3 9.402 9.40227 DHW electric heat pumps heat pump 9 15 68 111 368 225

File number Technology Unit

Unit per toe Saving (10-3

toe/unit/year)Units needed to

reach 25 toe

Deemed savings files





FIRE conference and workshop proceedings dedicated to white certificates (www.fire-italia.it/convegni.asp):

Convegno FIRE - Rimini - 4 novembre 2010 - Certificati bianchi: risultati e proposte di miglioramento

Key Energy 2009 - Rimini - 29 ottobre 2009 - Certificati bianchi: la partita si fa seria

Hotel Universo - Roma - 22 aprile 2008 - Il nuovo sistema di incentivazione dell’efficienza energetica

Older workshops not listed here but available on the indicated web page

AEEG’s annual reports about white certificates, www.autorita.energia.it/it/pubblicazioni_ee.htm

GME’s monthly newsletters, www.mercatoelettrico.org/It/Tools/newsletter.aspx

Concerted Action for the implementation of the 2006/32/EC directive, core theme number 3, information gathered through FIRE’s participation in working groups

Energy Efficiency Plan 2011 - Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Com-mittee and the Committee of the Regions, COM(2011) 109/4

“European Workshop on Experiences and Policies on Energy Saving Obligations and White Certificates” proceedings, 27-28 January 2011, http://re.jrc.ec.europa.eu/energyef-ficiency/events/WhC_Workshop.htm

“Tradable certificates for energy savings (white certificates) - theory and practice”, P. Bertoldi, S. Rezessy, 2006, Eu-ropean Commission Joint Research Centre, Institute for Environment and Sustainability

“Polices for increasing energy efficiency: Thirty years of expe-rience in OECD countries”, H. Gellera, P. Harringtonb, A. H. Rosenfeldc, S. Tanishimad, F. Unanderd, Energy Policy 34 (2006) 556–573

“What can we learn from tradable green certificate markets for trading white certificates?”, R. Haas, N. Sagbauer, G. Resch, ECEEE 2009 Summer Study - Act! Innovate! Deliver! Reducing energy demand sustainably

“Energy company obligations to save energy in Italy, the UK and France: what have we learnt?”, N. Eyre, M. Pavan, L. Bodineau, ECEEE 2009 Summer Study - Act! Innovate! Deliver! Reducing energy demand sustainably

IEA documentation and proceedings available through the web sites: www.ieadsm.org/ViewTask.aspx?ID=17&Task=14, www.ieadsm.org/Content.aspx?ID=7#ancMilan

Energie Plus, Maitriser l’energie durablement, Revue de l’Association technique energie environnement, biweekly newsletter and bimonthly insight, all numbers from 2007 to 2011

Ademe & Vous, Ademe international monthly magazine, all numbers from 2007 to 2011

The last issue is that since the scheme is complex, it is cru-cial to monitor its achievements, something that can be done through surveys and data analysis. Until now this issue has been underestimated in Italy, as the importance of disseminat-ing proper information to stakeholders.

It will be interesting to see what the achievements of the WhC scheme will be in the next 2–3 years. In the meantime, countries that are going to start such a scheme should make sure that they deal in an appropriate way with the illustrated issues and that they take into account a periodical review of the rules in order to overcome possible issues.

listofdeemedsavingfilesFiles no. 1-tris and no. 13b-bis and 13c-bis are no more active since January 2011.

usefullinksandreferences

lInKsofInsTITuTIonsAnDAssoCIATIonsrelATeDToWhITe

CerTIfICATesInITAly

AEEG, Italian electricity and gas authority, www.autorita.energia.it

GME, Italian energy market operator, www.mercatoelettrico.org

ENEA, Italian Agency for new technologies, energy and envi-ronment, www.enea.it

RSE, Energy System Research center, www.rse-web.itMSE, Ministry of Economic Development, www.

sviluppoeconomico.gov.itFederutility, Federation of DSOs, www.federutility.itAgesi, www.agesi.it, and Assoesco, www.assoesco.org, ESCos

associationsFIRE, Italian Federation for the rational use of energy, www.

fire-italia.org

referenCes

“Le ESCO in Italia”, a FIRE survey on ESCOs in Italy, 2008, www.fire-italia.it/indagini/2008-12_indagine_ESCO_re-port.pdf

“Indagine di monitoraggio della partecipazione al meccanis-mo dei WhC”, a FIRE survey on WhC in Italy, 2009, www.fire-italia.it/indagini/WhC/WhC_1.asp

“Indagine sul gradimento dei WhC tra gli energy manager”, a FIRE survey in cooperation with ENEL on the energy managers participation in WhC in Italy, 2011, www.fire-italia.it/indagini/WhC_ENEL/WhC_ENEL.asp

“Osservazioni sul meccanismo dei certificati bianchi e spunti per l’aggiornamento”, D. Di Santo, RdS, 2010, www.enea.it/attivita_ricerca/energia/sistema_elettrico/Elettrotec-nologie/Report-elettrotecnologie.html


The white certificate scheme: the italian experience and proposals for improvement

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